Focus on small print when signing plan

Arranging the finance is never the most exciting part of buying a car.

"People like to kick the tyres and so on," says Mr David Slattery, marketing manager at Bank of Ireland's cards and loans business.

But spend too long admiring the leather seats or pressing the sun roof open and shut and not enough time reading the credit agreement and car buyers could be heading for a nasty surprise.

In some cases, people have discovered years into a HP deal that their nature means they do not actually own the car until the final payment is made.

Confusion can arise during showroom sales pitches as to the exact terms of the hire purchase (HP), personal contract purchase (PCP) or lease agreement on offer.

However, previous cases indicate that the financial institution providing the credit deal to the customer through a garage could be forced to honour promises made by the dealer.

In the case of one complaint made to the Ombudsman for Credit Institutions, a man signed a HP agreement for a car on the understanding that after a three-year term he would have the option of either trading in the car, making a final balloon instalment, refinancing or returning the car as a settlement in lieu of the final payment.

The man paid 36 monthly instalments and then decided to return the car.

At this point, the institution indicated that the form of the HP deal allowed only one type of payment structure - the payment of the 36 instalments followed by a final balloon payment of 60 per cent of the original purchase price.

The financial institution providing the HP deal to the garage said that some misunderstanding must have arisen between the complainant and the dealer during initial discussions about the terms of the deal that had been struck.

The options the man thought were available to him were not included in the document signed by both parties.

However, the Ombudsman concluded that the option of returning the car had also been outlined to the man during negotiations with the dealer and ruled that the HP company was bound by these negotiations.

He directed that the HP company pay the complainant €1,800.

If customers feel they have been misled about a car finance plan or if the finance deal was mishandled in some way, they can complain to the Ombudsman for Credit Institutions or contact the Irish Financial Services Regulatory Authority (IFSRA) on its consumer helpline at 1890 777 777.

Laura Slattery